Securities and Exchange Commission

Law Firm Investigating the Sale of GWG L Bonds to Retail Investors by Western International Securities, Inc.

Published on: May 4, 2022 | by Iorio Altamirano

**Update: June 16, 2022** On June 15, 2022, the United States Securities and Exchange Commission filed a lawsuit against Western International Securities, Inc., and several of its brokers, in California Central District Court in connection with approximately $13.3 million in L bonds sold to retail customers. The firm is accused of failing to perform due diligence regarding the inherent risks associated with L Bonds. The brokers included in the suit are Steven Graham, Andy Gitipityapon, Thomas Swan, Nancy Cole, and Patrick Egan.

The complaint alleges that although the prospectus for the June 2020 offering stated that L Bonds were only suitable for customers with “substantial financial resources,” Western International did not set any criteria or thresholds for its customers to invest in L Bonds. Western International Securities also did not restrict the sale of L Bonds to customers with certain risk profiles or investment objectives.

The complaint also alleges that the named brokers misunderstood important issues regarding GWG Holdings, Inc. and the GWG L Bonds, including that GWG significantly changed its business model beginning in 2018 and that GWG L Bonds were not directly collateralized by life insurance policies. As a result, the brokers recommended GWG L Bonds to retail customers without a reasonable basis to believe that the investments were in the customers’ best interest.

GPB Investors Encouraged to File Arbitration Claims in 2022 to Preserve Legal Rights

Published on: January 3, 2022 | by Iorio Altamirano

Investors who purchased GPB funds in 2016 through a broker-dealer need to act now to preserve their legal rights. Failure to file an arbitration claim may prevent recovery of investment losses. Time is running out. GPB investors should act in 2022.

Key Takeaways:

Investors can potentially recover investment losses by filing claims against broker-dealers or investment-advisory firms that sold GPB private placement offerings for large commissions.

The Founder and Former CEO of GPB Capital Now Wants GPB Capital to Pay Legal Fees to Defend Him Against Criminal and Civil Fraud Charges

Published on: December 23, 2021 | by Iorio Altamirano

David Gentile, the disgraced founder and former CEO of GPB Capital Holdings LLC, has sued GPB Capital. Mr. Gentile seeks to make GPB Capital, which an independent court-appointed monitor is now overseeing, cover the legal costs for his defense against criminal and civil securities fraud.

In February 2021, Mr. Gentile was criminally charged with securities fraud, wire fraud, and conspiracy in federal court. The criminal complaint alleged that Mr. Gentile, among others, engaged in a scheme to defraud investors by misrepresenting the source of funds used to make monthly distributions to investors and the amount of revenue generated by two of GPB’s investment funds, GPB Holdings, LP, and GPB Automotive Portfolio, LP.

Separately, the SEC has charged Mr. Gentile, GPB Capital, and related entities with running a Ponzi-like scheme that raised roughly $1.8 billion from securities issued by GPB Capital. The SEC believes that as many as 17,000 retail investors nationwide have been defrauded.

Investor Update: Energy 11, L.P.’s Substantial Debt and Missed Accrued Distributions Could Take Years to Pay Off

Published on: November 16, 2021 | by Iorio Altamirano

Energy 11, L.P. is an illiquid, non-traded limited partnership sold as private placement security exclusively by broker-dealer David Lerner Associates, Inc. The limited partnership invests in the oil, gas, and energy sector, which has been extremely volatile the past several years. Energy 11 was not suitable for most conservative or retired investors.

On November 5, 2011, the Chairman and Chief Executive Officer of Energy 11 GP, LLC, the general partner of Energy 11, L.P. (“Energy 11”), sent a letter to investors of Energy 11 notifying them that partial distributions would resume after a nearly two-year hiatus. The amount of the distribution will be 50% of the regular monthly distribution.

In March 2020, Energy 11 suspended monthly distributions to its limited partners as the partnership took on massive debt. Unbeknownst to many investors, the distributions were merely a return of the limited partner’s original capital investment, not a dividend. Energy 11 currently owes 21 months of unpaid distributions to its limited partners, totaling approximately $42 million.

GPB Automotive Portfolio, LP Files 10-Q with SEC; Future Remains Uncertain for GPB Automotive Investors

Published on: November 15, 2021 | by Iorio Altamirano

Between July 2013 and June 2018, limited partners invested $675 million into GPB Automotive Portfolio, LP, which was sold as a private placement offering by broker-dealers and registered investment advisory firms across the country. Financial advisors, who received large commissions for selling limited partnership units of GPB Automotive, lured investors into this high-risk and illiquid security by emphasizing a high rate of return and monthly distributions. Unfortunately for investors, distributions have not been paid since December 2018.

With the recent announcement that GPB Automotive Portfolio, LP agreed to sell Prime Automotive for $880 million, limited partners have been wondering what that means for them.

Below, we delve into GPB Automotive LP’s latest quarterly filing with the SEC to look for answers.

GPB Capital Founder Seeks Millions in Distributions from Fund Investors That He Allegedly Defrauded

Published on: October 7, 2021 | by Iorio Altamirano

David Gentile, the disgraced founder of GPB Capital Holdings LLC, who is facing criminal and civil fraud charges, is seeking to obtain millions of dollars from GPB. Despite being accused of running a Ponzi-like scheme when he was running GPB Capital, Mr. Gentile is asking for court-supervised mediation to obtain a distribution of more than $5 million to cover his personal tax liability from last year. Meanwhile, limited partners of GPB Capital private placement funds, such as GPB Automotive Portfolio LP, have not received distributions since 2019. Worse, their investments remain illiquid, as there is no secondary market to sell their units.

Mr. Gentile claims to be “entitled to distributions” under the private equity firm’s operating agreements. He also claims that GPB Capital and its funds, including GPB Holdings, LP / GPB Holdings Qualified, LP, GPB Automotive Portfolio, LP, GPB Holdings II, LP, and GPB Waste Management, LP, are responsible for paying his legal fees. He is essentially asking investors who have been defrauded to pay his legal fees to defend him against numerous allegations of wrongdoing.

Lawyers for the U.S. Securities and Exchange Commission (SEC) argue that Mr. Gentile’s request should be denied because he does not qualify for mediation according to rules issued by the court.

Whistleblower Award Alert: The SEC Awards $36 Million to Whistleblower

Published on: September 24, 2021 | by Iorio Altamirano

The Securities and Exchange Commission (“SEC”) announced a whistleblower award of roughly $36 million to a whistleblower that provided information to the SEC on an illegal scheme. The information led to successful regulatory enforcement actions by the SEC and another federal agency.

In total, $161 million has been awarded to whistleblowers this month. On September 17, 2021, the SEC announced an award of $11.5 million to two whistleblowers. On September 15, 2021, the SEC announced two awards totaling $114 million. That award marked a milestone for the SEC’s 10-year-old whistleblower program, as it put the total amount of awards issued to over $1 billion.

In total, the SEC has awarded over $1.1 billion to 214 individuals since the whistleblower program became effective in August 2011. The awards are paid out of an investor protection fund established by Congress financed entirely through monetary sanctions paid to the SEC by securities law violators. Money is not taken or withheld from harmed investors to pay whistleblower awards.

The SEC Has Awarded Over $1 Billion to Whistleblowers

Published on: September 16, 2021 | by Iorio Altamirano

On September 15, 2021, the Securities and Exchange Commission (“SEC”) announced whistleblower awards of roughly $110 million and $4 million to two whistleblowers. With these awards, the SEC has issued more than $1 billion to 207 whistleblowers, ten years after the SECs Whistleblower Program became effective. The program has issued a whopping $500 million in the fiscal year 2021 alone.

In the SEC’s press release, SEC Chair Gary Gensler issued the following statement:

“Today’s announcement underscores the important role that whistleblowers play in helping the SEC detect, investigate, and prosecute potential violations of the securities laws. The assistance that whistleblowers provide is crucial to the SEC’s ability to enforce the rules of the road for our capital markets.

Did Robinhood Employees Trade GameStop and AMC Before Robinhood’s Public Announcement to Restrict Trading on January 28, 2021?

Published on: September 1, 2021 | by Iorio Altamirano

On September 1, 2021, Robinhood ($Hood) filed its first amendment to its Form S-1 Registration Statement with the U.S. Securities and Exchange Commission (“SEC”).

The public filing, which amends the registration statement that Robinhood filed in connection with its July 2021 initial public offering (IPO), discloses that the SEC’s Division of Examinations and the Financial Industry Regulatory Authority (“FINRA”) have submitted inquires to Robinhood related to whether any employee executed trades in certain securities, including GameStop Corp. and AMC Entertainment Holdings, Inc., before the public announcement that Robinhood would restrict trading in those securities on January 28, 2021.

On Thursday, January 28, 2021, Robinhood designated specific stocks “position closing only,” restricting its customers from purchasing additional shares in those stocks. The targeted stocks included GameStop (NYSE: GME), AMC (NYSE: AMC), Blackberry (NYSE: BB), Nokia (NYSE: NOK), Koss Corporation (NYSE: KOSS), and Express, Inc. (NYSE: EXPR).

Robinhood’s Amended Registration Statement Discloses That Robinhood Is Facing Numerous Lawsuits, Customer Arbitrations, and Regulatory Investigations

Published on: September 1, 2021 | by Iorio Altamirano

On September 1, 2021, Robinhood ($Hood) filed Amendment No 1 to its Form S-1 Registration Statement with the U.S. Securities and Exchange Commission (“SEC”). Form S-1 is the registration statement that Robinhood filed in connection with its July 2021 initial public offering (IPO).

Robinhood’s latest public filing discloses that Robinhood continues to face regulatory, legal, and reputational backlash for its past business practices.

The filing also discloses that the SEC and Financial Industry Regulatory Authority (“FINRA”) are investigating whether any Robinhood employees traded “meme stocks,” including GameStop Corp. and AMC Entertainment Holdings, Inc., before the public announcement that Robinhood would impose trading restrictions on those securities on January 28, 2021.